For the Binomial Distribution with the Given Values for N $\mathrm { n } = 28 \text { and } \mathrm { p } = 0.9$

question 34

Multiple Choice

For the binomial distribution with the given values for n and p, state whether or not it is suitable to use the normal distribution as an approximation.
- $\mathrm { n } = 28 \text { and } \mathrm { p } = 0.9$

• A) Normal approximation is suitable.
• B) Normal approximation is not suitable.

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Definitions:

Security Market Line

A graphical representation of the expected return of investments at different levels of risk, based on the Capital Asset Pricing Model (CAPM).

Market Risk Premium

The excess return that investors require for choosing a risky investment over a risk-free one.

Excess Return

The return on an investment that exceeds the return on a risk-free asset such as a Treasury bond.

Risk-Free Asset

A secure financial asset offering a promised payoff without any chance of losing money, commonly found in the form of government bonds.